ESG Reporting: What It Is, Why It Matters & How to Get It Right
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Grok More than 90% of large organizations now publish ESG reports. That number keeps growing as governments, investors, and business partners push for more visibility into how businesses handle environmental, social and governance issues.
What started as a voluntary effort has become a requirement in many places. Regulations in the EU, UK, US, and other markets now mandate ESG disclosures for thousands of organizations. At the same time, investors and customers expect clear, consistent ESG data when making decisions.
Key Takeaways
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What is ESG Reporting?
ESG reporting, also known as non-financial reporting, involves disclosing how your company performs on environmental, social, and governance topics. It gives regulators, investors, customers, and other stakeholders a clear view into how you’re managing risks, meeting standards, and making progress on non-financial issues. Unlike financial reporting, ESG reporting covers how your company impacts the environment and society, and how those factors could affect your business performance.
Core Topics Covered in ESG Reports
Most ESG reports include a mix of data and narrative across key issue areas. Common topics include:
- Environmental: Carbon emissions (Scope 1, 2, and sometimes 3), energy use and sourcing, water use, pollution, waste management, and climate risk and adaptation efforts.
- Social: Labor practices and human rights, DEI, health and safety performance, and supply chain working conditions.
- Governance: Ethics and anti-corruption policies, board structure and oversight, executive compensation, and whistleblower and grievance mechanisms.
These topics are usually tied to internal policies, targets, and performance indicators. The report explains what’s being measured, what’s been achieved, and what’s being worked on.
Common Formats and Reporting Channels
There’s no single format for ESG reporting. How you report will depend on your organization’s regulatory requirements, customer expectations, and internal capacity. The most common formats are:
- Annual sustainability or ESG reports published on your website
- ESG disclosures integrated with your main annual report (integrated reporting)
- Filings to external platforms or registries, such as:
- The CDP (for climate and water data)
- Government portals (e.g., EU or UK compliance registries)
- Stock exchange reporting platforms
Many organizations structure their reporting using established frameworks. These frameworks define what to report and how to calculate it, which helps ensure your report is consistent and comparable.
From Voluntary to Mandatory Reporting
In the early 2000s, ESG reporting was voluntary. Companies issued Corporate Social Responsibility (CSR) reports to show goodwill or respond to stakeholder pressure. There were no common standards, and reporting varied widely. GRI offered early structure, but adoption was optional.
By the 2010s, investors and rating agencies began pushing for more consistent ESG data. ESG ratings and indices like MSCI and the Dow Jones Sustainability Index made ESG performance more visible. Frameworks like SASB and TCFD emerged to meet investor demand for decision-ready data tied to financial performance.
From the late 2010s onward, governments started introducing mandatory ESG disclosure rules. Key milestones include:
- 2017–2021: Countries like the UK, Japan, and the EU began requiring TCFD-aligned climate reporting.
- 2021–2022: The EU proposed and adopted the CSRD, introducing wide-reaching mandatory ESG disclosures.
- 2022: The ISSB was launched to unify global ESG standards.
- 2023–2024: The SEC’s climate rule advanced in the US, mandating publicly traded companies to report climate-related information annually.
- 2025: US policy pivoted when the executive order for federal climate risk assessment was revoked. In March, the SEC ended its legal defense of the climate disclosure rule, effectively ending the mandatory framework.
- 2025–2026: The EU’s Omnibus I Directive amended the CSRD by raising the financial threshold and narrowing the scope of who must report, while also delaying sector-specific standards until June 2026.
- 2026: California’s SB 253 went into effect, requiring large companies operating in the state to disclose Scope 1 and 2 emissions, with Scope 3 requirements following in 2027.
While there’s a clear trend toward convergence, with frameworks like TCFD and ISSB influencing global standards, regional differences persist. In the EU and California, detailed reporting is now a legal mandate. In other regions, the pressure comes from investors, insurers and customers treating ESG data as a standard requirement for doing business. So while ESG reporting might not be required by law in every market, you’re likely to need it to meet growing stakeholder expectations.
To Whom Do ESG Reporting Apply?
ESG reporting was once mainly the territory of large, publicly listed companies like those in the Fortune 500 or FTSE 100. These companies faced pressure from investors, regulators, and ESG rating agencies to be transparent about sustainability risks. Today, that expectation is a legal requirement in many jurisdictions.
- In the EU, the latest Omnibus I Directive under CSRD specifically targets companies with more than 1,000 employees and an annual net turnover exceeding €450 million. Firms falling below these thresholds are now largely exempt from mandatory reporting to reduce administrative burdens.
- In the US, most S&P 500 companies already publish ESG reports, state-level laws are filling the gap left by the defunct SEC federal rule. California’s SB 253 requires companies with over $1 billion in revenue to disclose greenhouse gas emissions, starting with Scope 1 and 2 in 2026 and Scope 3 in 2027. Additionally, SB 261 requires companies with over $500 million in revenue to report on climate-related financial risks every two years, starting in 2026.
ESG reporting requirements also increasingly extend across global supply chains. Large buyers often ask suppliers to share ESG data as part of procurement processes or compliance checks. This means mid-sized companies may need to report ESG metrics to key customers, even with no legal mandate. Supplier codes of conduct and ESG questionnaires are now common parts of doing business with multinationals, meaning ESG reporting is no longer just a requirement for the world’s largest organizations.
Sector also matters. Some industries (financial services, oil and gas, manufacturing, heavy industry, consumer goods) naturally face more scrutiny than others due to the size or nature of their environmental and social impacts. If your company operates in any of these sectors, you’re more likely to face mandatory ESG disclosures or high stakeholder expectations.
How ESG Reporting Works: The Reporting Process
ESG reporting follows a structured cycle. It starts with collecting the right data, moves through prioritization and framework selection, and ends with publishing the report. Each stage helps build a clear, useful disclosure that meets increasing stakeholder expectations and regulatory requirements.
ESG Data Collection
The process starts with gathering ESG data from across the organization. This includes environmental data from operations, social data from HR and workforce teams, and governance data from legal or compliance functions. Because ESG issues cut across different departments, collaboration is essential.
- Environmental data might include energy consumption, greenhouse gas emissions, waste volumes, and water usage.
- Social data may come from HR systems tracking workforce demographics, safety incidents, and training hours.
- Governance information typically involves board structure, ethics policies, and compliance metrics.
Manual tracking is still common in early-stage reporting, but many companies adopt ESG software platforms to centralize data, improve accuracy, and reduce the reporting workload over time.
Materiality Assessment
A materiality assessment helps decide which topics belong in the report. It identifies which ESG issues matter most based on their relevance to your business and their importance to stakeholders.
A logistics company may prioritize carbon emissions and supply chain labor conditions. A software company might focus more on data privacy and employee well-being. The point is to focus your reporting on the issues that drive risk, opportunity, and performance.
Some regulations now require “double materiality,” which considers how ESG factors impact the business and how the business impacts society or and the environment.
Choosing a Reporting Framework
Once you know what to report, the next step is deciding how. ESG reporting frameworks provide guidance on which indicators to include, how to calculate them, and how to present your findings.
Most companies use one or more of the following:
- GRI for broad stakeholder-focused sustainability disclosure
- SASB for industry-specific, investor-focused reporting
- TCFD for climate risk and governance
- CSRD-ESRS for mandatory reporting in the EU
- ISSB standards for global alignment and investor use
Choosing a framework early helps shape the structure and methodology of your report and improves consistency for those reading it.
Report Preparation and Verification
After collecting data and choosing your framework, you begin building the report. This typically includes a mix of:
- Context: Your ESG strategy, goals, and policies
- Metrics: Performance data for each key topic
- Commentary: Explanations of progress, setbacks, and plans
Most reports include visual elements like charts or year-over-year comparisons. Some also include short case studies to illustrate programs in action. The goal is to provide information that’s clear, decision-ready, and backed by evidence.
As ESG reporting becomes more regulated, external assurance is becoming common. This means a third party reviews selected ESG data to confirm it is accurate and traceable. In the EU, the CSRD requires limited assurance for reported ESG data. Other regions may follow with similar requirements. Assurance improves the reliability of your report and gives stakeholders more confidence in the information you provide.
Publication, Disclosure, and Continuous Improvement
Once complete, the ESG report is published. Most companies:
- Upload it to the corporate website
- Include ESG sections in their annual financial filings
- Submit selected data to platforms like CDP or regulatory portals.
Reporting timelines usually follow the financial calendar, with full reports published annually. In some cases, companies also provide quarterly updates on key ESG indicators. Regular ESG communications help keep stakeholders engaged between reports and demonstrate that your sustainability progress is an active, year-round commitment.
Each ESG reporting cycle gives you new insights into how your organization is performing and where it can improve. You may expand your coverage over time by tracking more suppliers, adding new ESG metrics, or aligning with updated frameworks. Data quality often improves with each cycle, and reporting becomes more integrated with business planning.
Because the path to getting this right is rarely linear, many organizations are turning to ESG rating platforms to support high-quality reporting. Formalized rating assessments provide a structured way to identify data gaps and organize internal metrics before moving to a formal disclosure. By using a rating as a roadmap, companies can ensure their data is verified and accurate, making the transition to mandatory ESG reporting significantly more efficient.
ESG Reporting Readiness Checklist
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Major ESG Reporting Frameworks and Standards
Choosing the right structure for your ESG data is just as important as the data itself. Frameworks and standards provide the necessary blueprints, telling you which metrics to include, how to calculate them, and how to communicate your data in a way that’s useful to others, whether that’s investors, regulators, or customers.
Some frameworks are designed for general use, others are sector-specific, investor-focused, or required by law. To reduce the burden on companies reporting in multiple regions, many of these systems are now aligning or merging to create a more unified global approach.
There are two types of ESG reporting frameworks:
- Voluntary global frameworks, including the GRI, SASB, and TCFD, are widely adopted across industries and geographies.
- Mandatory national or regional frameworks, such as the EU’s CSRD, which is transposed into country law.
Many voluntary frameworks have shaped or directly influenced regulatory standards. For example, the EU’s ESRS builds on GRI and TCFD concepts. ISSB standards consolidate SASB and TCFD under a single umbrella, aiming to serve as a global baseline that regulators can adopt or build on.
GRI: Broad, Stakeholder-Focused Reporting
The Global Reporting Initiative (GRI) offers a set of standards for companies that want to communicate their sustainability impact clearly and consistently. GRI is one of the most established and widely used ESG frameworks.
It’s designed for a wide range of stakeholders and supports a double materiality approach. That means you report on both how ESG issues affect your business and how your business affects the environment and society. GRI covers the full ESG spectrum, from emissions and energy use to labor practices and human rights. It’s often used as the backbone of a general-purpose sustainability report.
SASB: Sector-Specific and Financially Material
The Sustainability Accounting Standards Board (SASB) provides reporting standards for 77. Each standard focuses on the specific ESG issues most likely to impact a company’s financial condition or operating performance. This framework is geared toward investors and capital markets.
SASB standards help companies identify which ESG metrics are most relevant to their sector and how to report them in a way that links directly to financial performance. It’s often used alongside broader frameworks like GRI to give stakeholders a clearer view of risk and value drivers. SASB is now part of the International Financial Reporting Standards (IFRS) Foundation and has been rolled into the ISSB standards.
CSRD and ESRS: Mandatory Reporting in the EU
The EU’s Corporate Sustainability Reporting Directive (CSRD) is a mandatory reporting regime that also applies to non-EU companies operating in Europe above a certain revenue threshold.
CSRD requires companies to report according to the European Sustainability Reporting Standards (ESRS), which are detailed, prescriptive, and subject to a double materiality assessment. These standards go beyond climate to include supply chain practices, governance, workforce data, and human rights due diligence.
Reports under CSRD must be digitally tagged, submitted to regulators, and assured by third parties. Compliance for large EU companies began with fiscal year 2024 data, with requirements expanding to other firms in the coming years. To ease this transition, the Omnibus I Directive delayed the adoption of sector-specific and non-EU standards until June 2026, giving the next waves of companies more time to prepare for disclosure.
TCFD: Climate Risk Disclosure Framework
The Task Force on Climate-related Financial Disclosures (TCFD) provides a structure for companies to report climate-related risks and opportunities. It groups disclosures into four key areas: governance, strategy, risk management, and metrics and targets.
While TCFD is voluntary, it has been adopted as a requirement in several countries and has heavily influenced the development of other frameworks, including ISSB and elements of the EU’s ESRS. TCFD is focused on the “E” in ESG, specifically climate. Companies often use it to structure the climate section of their broader ESG reporting.
ISSB: Global Baseline Standards
The International Sustainability Standards Board (ISSB) was created to bring consistency to ESG reporting across jurisdictions. Its first two standards, IFRS S1 and IFRS S2, were released in 2023:
- IFRS S1 is a general standard for reporting on all sustainability-related risks and opportunities that could affect a company’s value.
- IFRS S2 focuses specifically on climate disclosures and incorporates TCFD’s structure.
ISSB standards aim to complement financial reporting and are crafted to meet investor needs. Several countries and stock exchanges are already contemplating the adoption of these standards as part of their official regulatory frameworks.
Summary and Key Differences
| Standard | Scope | Voluntary / Mandatory | Primary Use |
| GRI | Broad ESG, stakeholder-oriented | Voluntary | General sustainability disclosures |
| SASB | Industry-specific, financial materiality | Voluntary; Part of ISSB | Investor-focused reporting |
| CSRD/ESRS | Full ESG, double materiality | Mandatory for companies in scope | Regulatory compliance |
| TCFD | Climate risk governance | Mandatory in some regions | Climate-specific risk reporting |
| ISSB | Sustainability (S1) and climate (S2) | Voluntary baseline | Investor and regulatory alignment |
ESG Reporting in Practice: Risk Management, Due Diligence, and Performance
ESG reporting does more than inform external stakeholders; it supports critical internal functions like risk management, compliance, and operational performance. The metrics you report can directly shape how your business identifies issues, sets priorities, and improves over time.
- Enhanced Risk Management: Reporting ESG data helps embed sustainability into your company’s risk management process. Monitoring indicators consistently makes risks more visible and easier to manage. For example, if reports show rising emissions or high water use in drought-prone regions, those insights feed into operational planning and risk mitigation. Similarly, repeated supplier audit failures or low ethics training completion rates can flag governance or social risks before they escalate.
- Regulatory Due Diligence: ESG reporting creates a structured way to document compliance with human rights and environmental laws. Reports often include details on supplier audits, grievance mechanisms, corrective actions, and training programs. For laws like Germany’s Supply Chain Act or the EU Corporate Sustainability Due Diligence Directive, this type of reporting can serve as evidence of compliance and help reduce legal and reputational exposure.
- Improved Operational Performance: Internally, the act of reporting drives better performance. When ESG metrics are published, management is more likely to set clear targets and monitor progress. If safety incidents or diversity ratios are tracked year over year, teams are more motivated to address gaps. Reporting introduces discipline to how ESG issues are managed, much like financial KPIs do for commercial performance.
- Financial Outcomes and Long-Term Value: Better ESG performance often aligns with better financial outcomes. Using less energy reduces costs. Managing labor issues lowers disruption and turnover. Transparent governance reduces the risk of fraud or regulatory fines. All of this contributes to more stable operations and stronger long-term value.
Many companies now integrate ESG metrics into business strategy, including leadership accountability. It’s not uncommon for ESG targets to be linked to executive compensation, signaling that sustainability is a business priority, not rather than a side project.
Ready to Report Better?
EcoVadis helps organizations turn ESG data into clear, actionable reporting, whether you’re responding to regulatory requirements, meeting investor expectations, or managing supply chain risk. Our tools are built to support every stage of the ESG reporting process, from data collection to improvement tracking.
Talk to us about how EcoVadis can support your ESG reporting, from data collection to disclosure.
FAQs
Q: What is the difference between a CSR report and an ESG report?
A: While both CSR reports and ESG reports cover sustainability, they serve different purposes and audiences.
- A CSR report is a narrative-driven document used to communicate a company’s values and social commitments to a broad group of stakeholders, including employees and the local community.
- An ESG report is a highly structured, data-heavy disclosure designed for investors, regulators and banks. It focuses on quantitative metrics and material risks that could impact the company’s financial value.
Q: Which companies are required to report under the EU CSRD in 2026?
A: Under the 2026 Omnibus I Directive, mandatory CSRD reporting is now limited to large EU companies (and certain groups) that meet both of the following criteria: more than 1,000 employees and a net annual turnover exceeding €450 million. Non-EU parent companies are also in scope if they generate over €450 million in net turnover within the EU for two consecutive years and have a significant EU presence.
Q: When does mandatory emissions reporting begin under California SB 253?
A: Reporting applies to any public or private entity with total annual revenues over $1 billion that does business in California. Compliance is phased:
- 2026: Companies must report Scope 1 and Scope 2 emissions for the 2025 fiscal year.
- 2027: Reporting expands to include Scope 3 (value chain) emissions. Organizations are considered to be doing business in the state if they engage in any transaction for financial gain within California, or meet specific property, payroll, or sales thresholds.
Q: What is double materiality in ESG reporting?
A: Double materiality requires companies to report on two fronts: how ESG issues create financial risks for the business (financial materiality) and how the business itself impacts people and the environment (impact materiality). It is a core requirement for any organization reporting under the EU’s ESRS.
Q: What are the most widely used ESG reporting frameworks in 2026?
A: Most organizations now align their reporting with one or more of these three dominant standards:
- ISSB (IFRS S1 and S2): Now the global baseline for investor-focused reporting. It has effectively absorbed the TCFD and SASB frameworks, making it the primary standard for disclosing financially material climate and sustainability risks.
- GRI (Global Reporting Initiative): Still the most widely used voluntary standard for impact reporting. It remains the preferred choice for companies communicating their broader social and environmental impact to a wide range of stakeholders beyond just investors.
- ESRS (European Sustainability Reporting Standards): The mandatory framework for any company in scope of the EU’s CSRD. It is unique for its “double materiality” requirement, forcing companies to report on both their financial risks and their external impacts.
While other niche frameworks exist (like the TNFD for nature-related risks), most businesses in 2026 use a combination of GRI for general impact and ISSB or ESRS for regulatory and investor compliance.
